Your success as a business owner is dependent on the decisions you make. Every decision you make regarding finances, operations, marketing, hiring and business strategy can lead you to either favorable or non-favorable results. Usually you want to be right at least 50% of the time. Most people will make mistakes, but that is a normal part of business and should not be feared. What you should fear is making decisions that are fatal to the life of your business and keep you out of the game. Therefore, you need to focus on how to maximize the chances of you making good decisions to continually grow your business and prevent yourself from total failure.
To maximize your decision-making efforts, you need to combine both qualitative and quantitative analysis. This is what separates the successful business owners from the idiots that make decisions without proper analysis or insight. Some may argue that it is best to take quick action and avoid “paralysis of analysis”, but I believe you must strike a balance to ensure that you have all the required information and analysis done before making important decisions.
What is quantitative and qualitative analysis and why do you need to combine them together?
· Using subjective judgement on un-quantifiable information such as
o Cultural shifts, resonance, nostalgia and trends
o Employee and Customer Sentiment
· Almost like listening to your gut
· Understanding different business models and competitive advantages that are not easy quantifiable
o Ex: Warren Buffet is one of the masters of this area in qualitative analysis. Having very strong skills in this area has allowed him to grow Berkshire Hathaway to its size today
· A method to measure things to conduct economic, business and financial analysis to understand and predict things
o Ex: Rations, Metrics, Valuations, Economic Indicators, Forecasting, budgeting, statistical models and financial models.
· Quantitative analysis allows you to check yourself from any unknown biases you may have, blind spots you missed in qualitative analysis and to ensure you are looking at the correct narrative in your analysis.
It is important to use both methods of analysis in conjunction to maximize the chances of making the right decision.
How can business owners conduct qualitative analysis?
· Collect surveys from your customers and employees
· Conduct informational interviews
· Engage in online qualitative research and try to understand the sentiment of the market
· Engage in open discussions with your employees, contractors or any consultants that you may hire
How can business owners conduct quantitative analysis?
· Use your various accounting and booking records to look at financial data to conduct financial analysis
o Use managerial accounting to allocate capital efficiently and ensure proper financial management
o Use financial models to decide what specific projects and investments to make
o Use accounting data to properly budget, make forecasts and manage operating liquidity
· Extract data from social media analytics, google analytics, emailing lists and other various platforms
o Pull this data into excel or another analytics program to pull insights to make better decisions regarding marketing, product pricing and customer relations
· Pull various public data sets from various sources to conduct market research to evaluate competition and even learn about other industries and products that may relate to your business
The Bottom Line
It is in your best interest as a business owner to increase your analytical skills to improve on your decision-making abilities. You are the executive of your company and thinking like a true entrepreneur/executive over time will yield better earnings, customer retention, employee loyalty, productivity, sales and overall growth. Use all the analytical tools at your disposal to put your company at an advantage and manage your company better than the competition. Business is like a sport and just like sports, those who have done proper research in their training, nutrition and game strategy tend to be more successful than those that are competing haphazardly.